Malaysian palm oil stockpiles fell to a 10-month low at end-May, according to official data on Wednesday, extending monthly falls since March, as export gains outpaced an unexpected rise in production.
Benchmark palm oil prices have eased about 5% since the start of the year, weighed by concerns about high stocks and flat demand.
Falling stockpiles could support palm prices , which were last up 0.1% at 2,009 ringgit ($482.70) a tonne at the midday break.
Stockpiles at end-May in Malaysia, the world’s second largest producer of the edible oil, fell 10.3% to 2.45 million tonnes from the previous month, data from industry regulator the Malaysian Palm Oil Board (MPOB) showed.
It was the third straight month of inventory declines and took stocks to their lowest levels since July 2018.
“Stocks went down on higher exports and local consumption,” said a trader at an oil palm milling company, adding that Malaysia’s local consumption of palm oil rose due to higher demand during the Muslim fasting month of Ramadan.
Exports rose for a third month in a row in May, up 3.5% from April to 1.71 million tonnes, the MPOB data showed, taking shipments to their highest since August 2016.
“June exports might not be as good as May as the Ramadan and Eid demand will be over,” said the trader.
Palm oil output unexpectedly rose slightly in May by 1.3% on a month earlier to 1.67 million tonnes, taking production to its highest for the month of May in four years.
“There was a higher number of working days in May, and workers may have harvested more aggressively before going on holidays,” said a Kuala Lumpur-based futures trader, referring to the Eid public holidays in early June.
“June production then should be lower,” the futures trader added. A Reuters survey had expected production to dip in May as fasting during Ramadan would affect the productivity of workers on oil palm estates.
The Reuters poll had forecast palm oil stockpiles at end-May to fall 9.7% to 2.46 million tonnes. Production was seen dropping 2% to 1.61 million tonnes, while exports were pegged to rise 3.3% to 1.71 million tonnes.